The ‘Brazil Trade’ Is Back — Why Analysts See More Upside Ahead - iShares MSCI Peru and Global Exposure ETF (ARCA:EPU), iShares MSCI South Korea ETF (ARCA:EWY)

Core Viewpoint - Brazilian equities are experiencing a significant resurgence, driven by rising commodity prices, a weakening U.S. dollar, and a shift towards emerging markets, with the iShares MSCI Brazil ETF (EWZ) outperforming U.S. equities by 17 percentage points in one month, marking its strongest performance in over four years [1][2]. Group 1: Performance Metrics - The iShares MSCI Brazil ETF (EWZ) has increased approximately 20% month-to-date, while the SPDR S&P 500 ETF Trust (SPY) has gained just under 3% [1]. - EWZ ranks as the third best-performing U.S.-listed country ETF over the past month, following the iShares MSCI Peru and Global Exposure ETF (EPU) and the iShares MSCI South Korea ETF (EWY) [2]. Group 2: Market Dynamics - The relative performance of EWZ compared to SPY has broken above a long-term downtrend, indicating a potential technical breakout that could attract more investment into Brazilian equities [2]. - Historical data shows that during the last major commodity supercycle from October 2002 to May 2008, Brazilian equities outperformed the S&P 500 by over 1,000%, highlighting their sensitivity to resource-driven bull markets [3]. Group 3: Expert Insights - Brazilian macro analyst Otavio Tavi Costa suggests that the breakout of Brazilian equities is part of a larger global market shift, emphasizing the connection to the recent decline of the U.S. dollar [6][8]. - Analysts at 22V Research express a bullish outlook on Brazil, favoring emerging markets driven by commodities and materials sectors, and highlighting the continued weakness of the U.S. dollar as a catalyst for outperformance [9][10]. Group 4: Sector Composition and Investment Sentiment - The sector composition of EWZ aligns with favored investment themes, particularly in materials, energy, and banks, which are expected to benefit from the current market dynamics [12]. - Brazil has been structurally underowned and underperforming, creating a potential for significant momentum as capital begins to flow back into the market [13].